Indonesia air carrier Garuda to invest $2.5b in fleet expansion; plans $500m global bond issue

Photo by Garuda Indonesia

State-owned flight carrier PT Garuda Indonesia Tbk (GIAA) is in the process of a $2.5-billion fleet acquisition plan as it looks to add 50 new aircraft to replace its older fleet.

Garuda operates 181 aircraft with an average fleet age of 4.7 years. The airline needs to replace 92 older planes by 2022, said a senior official.

Garuda is looking at bond issuance, export credit agency debt and cash reserves to fund the buying programme.

Finance director Ari Askhara told DEALSTREETASIA, Garuda is considering a $500-million global bond issue in the first quarter of 2016.

The airline has been exploring new sources of financing options, that are cost competitive. In May this year, Garuda implemented a global issuance of Islamic bond (SUKUK) worth $500 million with a five-year term at 5.95 per cent.

Garuda’s fleet consists of eight Boeing 777-300, 22 Airbus A330-200/300, two Boeing 747-400, 10 ATR 72, 15 Bombardier CRJ1000 aircraft, 88 Boeing 737-300/500/ 800 and 36 Airbus A320 aircraft. Its average fleet age is 4.7 years. By the end of 2015 Garuda aims to operate 187 aircraft (44 for its unit PT Citilink Indonesia).

Garuda CEO Arif Wibowo said, at a press conference last week, the airline will decide whether to go with Airbus or Boeing for the aircraft purchase. “We will start ordering the aircraft in early 2016,” he added.

Garuda has signed a memorandum of collaboration with Boeing and letter of intents with Airbus for the fleet addition. It is also looking at adding propeller aircraft from French ATR.

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In the first nine months of 2015, Garuda made a net profit of $50.1 million compared with a $222.3 million loss a year ago, on the back of lower fuel prices and cost reductions.

The haze that has blanketed the country in the past few months, Wibowo said, cost Garuda about $8 million. Nearly 1.2 lakh passengers cancelled their flights in September alone.

Garuda’s revenues rose 0.5 per cent from $2,831 billion to $2,845 billion in 2015 while total expenses reduced from $3.08 billion to $2.72 billion this year.

The CEO said, Garuda wants to continue to reduce its operational costs and manage foreign currency better.

Since the first quarter of the 2015, Garuda’s strategy to anticipate the effect of Rupiah weakening against the US dollar helped the airliner reduce its financing costs. Garuda’s cross currency swap with some banks worth Rp 2 trillion helped it reduce its costs.

In the first nine months of 2015, the company carried 24.55 million passengers, an increase of 17.5 per cent compared to the same period in 2014.

This year, Garuda plans to add new route from Denpasar to Shanghai and together with Citilink will strengthen the domestic and regional markets.

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.